As quoted in the recent edition (Issue 734) of Lebanon This Week, published by the Economic Research and Analysis Department of Byblos Bank, “Given the intensity of the compounding crises in Lebanon, it is the responsibility and duty of all political actors to work together to prioritize the national interest and to rise to the challenges facing the Lebanese people.”
This assessment in the UN Security Council report succinctly summarizes Lebanon today, torn between a continuing decline and a struggling political system fighting itself while trying to re-orient its priorities. Having mostly survived the parliamentary elections, the traditional leaders insist on a slow-go strategy when it comes to reforms. There are some breaks in the gridlock: passing reforms to the Banking Secrecy Law, adopting the World Bank loan of $150 million to support wheat purchasing and distribution, raising some public sector salaries, and the promise of a national budget are all steps in the right direction.
There is legitimate concern over whether the various amendments to the Banking Secrecy Law will be passed or not and in what form; if the conditions of the World Bank loan will be met; and if the government can find some way to raise salaries without increasing the national debt.
The global crowd-sourced database, Numbeo, ranks the cost of living in Beirut as the 12th highest in the world and the highest in the Arab world, outranking Dubai (12 vs 208 globally). This means that the costs of living in Beirut are 98% higher for its residents than most of the 510 other places in the world that were tallied. Globally, groceries in Beirut are more expensive than those even in southern California, Geneva, and New York City, but cheaper than those in Zurich, Bern, and Honolulu. Similar comparisons were made regarding rent, restaurants, and consumer goods.
Given the deficiencies in the fiscal health of the country, the untouchable gold reserves, and the soon-to-decline bump in revenues once the tourism season is over, the government only has a few options. The country may dissipate into a fragile state that can neither pay its bills nor support is people, making its state of affairs easy prey for regional actors with malign intentions. It can adopt the necessary reforms to initiate the International Monetary Fund (IMF) recovery regime. As some have advanced already, the Lebanese government can ask for UN receivership to take over the country and manage its affairs. While the last option has some support, given the political realities, leaving Lebanon to the hands of UN administrators is a fantasy for those who either don’t believe in the capacity of the system for recovery and renewal or have their own agendas.
The United Nations and the international community are ready to assist through multiple avenues once reforms are instituted. In the UN Sustainable Development Comprehensive Framework (UNSDCF) with Lebanon, the UN has made clear that adopting reforms is key to achieving the Framework and restoring investor confidence in the country. The UN’s assistance in promoting a development-based approach to recovery is based on the assumption that key structural reforms will be implemented. The UN has also said that it would develop a joint financing strategy to implement the UNSDCF and to ensure multiyear financing for key emergency development priorities.
What’s critical in this proposal and others from international donors is the emphasis on the implementation of a multisector approach that includes reforms to the government and the fiscal system, with an emphasis on reinvigorating the private sector and restoring economic activity in order for people to regain their livelihoods, strengthening and broadening the social safety net, and restructuring public services to sustain a broader base of community services, among others.
There are many papers indicating what must be done; how and by whom are the needed ingredients. In any scenario, there will be painful adjustments, and both the Parliamentary and government leadership must step up and respond to the public’s desperation before it turns into rage as in Sri Lanka. It is obvious to the political chiefs that the painful implementation of restructuring will reduce their hegemony and capacity to continue their control over state business.
Lebanon needs to take stock of what it must do to regain its sense of purpose and direction to once again become a land of opportunity and promise. This will require adjustments and shocks to the system to end the current status of prosperity for the few and remnants of a quality of life for the rest.
Disclaimer: The views and opinions expressed in these articles are those of the author and do not necessarily reflect the position of the American Task Force on Lebanon, a non-profit, nonpartisan leadership organization of Lebanese-Americans.
